Conveyors and Conveying Equipment

SIC 3535

Industry report:

This category covers establishments primarily engaged in manufacturing conveyors and conveying equipment for installation in factories, warehouses, mines, and other industrial and commercial establishments. Establishments primarily engaged in manufacturing farm elevators and conveyors are classified in SIC 3523: Farm Machinery and Equipment; those manufacturing passenger or freight elevators, dumbwaiters, and moving stairways are classified in SIC 3534: Elevators and Moving Stairways; and those manufacturing overhead traveling cranes and monorail systems are classified in SIC 3536: Overhead Traveling Cranes, Hoists, and Monorail Systems.

Industry Snapshot

Conveying systems have been an integral part of mining operations for nearly a century, but manufacturing industries have also become dependent on them. Regulations mandated by the Occupational Safety and Health Administration (OSHA) limited human exposure to certain harmful materials, requiring more extensive machine automation. With increased automation, conveying systems have become an integral part of manufacturing plant operations. Besides these uses, conveying systems have also become ubiquitous in airport baggage handling operations, and public and private package and mail handling operations. The industry has also benefited from the Internet's growth, as the boom in online sales subsequently increased the need for conveyor systems for order picking and handling.

Conveyors and conveying equipment comprise one of the four major groupings of the material handling equipment manufacturing sector, which in turn is part of the huge domestic material handling market ($156 billion in 2009). Therefore, the economic trends of this sector are a good indicator of the conveyor industry's economic health. From the late 1990s, the United States had seen its exports of material handling equipment gradually decline, according to the U.S. Department of Commerce, while imports have risen; making the nation a net importer of material handling equipment. Domestic manufactured conveyor systems followed this trajectory with a steady decline in foreign sales and exports, while the U.S. market saw an increase in imports of conveyor systems. However, the material handling sector continued growing into the late years of the first decade of the 2000s.

Organization and Structure

The conveying system industry is highly specialized and therefore almost totally self-contained. While the industry relies heavily on suppliers for many of the materials consumed, the design and assembly of the systems is usually performed at one facility. Armed with design engineers and production facilities, the industry is capable of meeting individual material movement challenges in industries ranging from mining to heavy manufacturing to the airline industry. Standard equipment is produced in the pre-engineered sector of the industry.

Of the total number of establishments involved in this industry, about a quarter was involved with manufacturing unit handling conveyors and conveying systems, with an additional 2.5 percent dedicated to these systems' parts, attachments, and accessories. Another quarter was involved in manufacturing bulk material handling conveyors and conveying systems, with an additional 5 percent dedicated to these systems' parts, attachments, and accessories, according to U.S. Census Bureau data. Michigan, Ohio, and California hosted the greatest number of establishments involved in this industry, followed by Illinois, Pennsylvania, and Texas.

Background and Development

The first conveying systems were developed to draw water from wells in the ground. This method was used in various applications over the centuries, but conveying systems really gained importance with the development of the mining industry. In the beginning, mine cars were used as buckets to haul coal or other ores to the earth's surface. Mine cars have been replaced with continuous conveying systems such as belt conveyors, steel-apron conveyors, and chain conveyors, which are used to haul as much as 5,000 tons per hour on lower-grade slopes and 1,300 tons per hour on steep slopes. Since wages accounted for most of the production costs in the mining industry, mechanization was necessary. Likewise, as the government began to regulate worker safety and workers' compensation claims, the initial expense of installing a mechanized system seemed like a good investment because the system could minimize workers' contact with hazardous materials and reduce physical strain.

Although mining has long been the greatest force in the conveying system industry, the growing presence of production lines since Henry Ford's development of the assembly line has expanded the industry and brought new challenges. As machines were created to perform at higher capacities, the conveying systems delivering the materials to the machines had to meet these capacities. For example, in some beverage industries today, conveying systems are required to maintain a flow of up to 1,600 units per minute.

The worldwide recession of the late 1980s and early 1990s affected the mining industry significantly. In countries where commodity prices fell, some mining operations ceased due to production costs exceeding the market value of the extracted raw materials. Capital expenditures in this area fell as well, with investment in conveying systems being an unjustifiable expenditure.

As one component of the greater material handling industry, conveyers found new importance in the flexible manufacturing systems (FMS) methodology during the 1980s. However, as this theoretical approach was moving in one direction, manufacturers were concentrating more on productivity in terms of cost reduction. The installation of FMS was often cost prohibitive and limiting to companies reliant on reacting quickly to changing market needs. Yet, in terms of lowering costs through increased quality and efficiency to increase profitability, the material handling improvements through FMS were justifiable costs. Companies with existing conveying systems that wished to increase productivity through improved material handling techniques provided a market for the retrofitting segment. Manufacturing industries, particularly where machining is a large portion of value-added production, employ palletization work-holding principles in everyday operations. These principles transfer materials from one machining center to another on the same work-holding device, eliminating setup time.

In 1994, the conveyor industry was characterized by very low expenditures for plant investment, only about $89.4 million for the entire industry and $123,683 average expenditures per establishment (more than 60 percent below the total manufacturing industry average).

The late 1990s brought record results industry-wide in shipments and new orders, according to the Conveyor Equipment Manufacturers Association (CEMA). Both shipments and new orders set records in 1997, at $6.36 billion and $5.80 billion, respectively. Shipments continued to rise in 1998, setting a new record of $6.55 billion. After dipping slightly to $6.53 billion in 1999, shipments again reached record levels at $6.84 billion in 2000. Industry executives attributed these strong results to the capital investment trend that improved the flow of work and speeded order processing.

In 2006, the Conveyor Equipment Manufacturers Association (CEMA) reported that new orders in the industry had climbed for the third year in a row. The association reported that new orders in 2005 were estimated to be $5.27 billion, an increase of 3.1 percent over the 2004 new orders figure of $5.10 billion. According to U.S. Census Bureau data, shipments of conveyor and conveying equipment only rose slightly between 2002 and 2004, from approximately $4.9 billion to $5.0 billion, although the 2004 figure was an improvement over the $4.8 billion worth of shipments reached in 2003. However, shipments in the mid-2000s were substantially lower than those reached in the late 1990s and 2000.

Another positive indicator of the industry's overall health in the mid-2000s was the condition of the materials handling sector of the U.S. economy, of which material handling equipment such as conveyors form an integral part. Material handling industry expenditures in the United States totaled $125 billion in 2005, according to the Material Handling Industry of America (MHIA). Material handling equipment shipments increased 25.4 percent and reached $22.4 billion in 2005, and that year new materials handling equipment orders increased by 27 percent and reached $23.5 billion, according to U.S. Census Bureau figures cited in a MHIA report.

While demand for conveyors and conveying equipment grew slightly in 2007, industry experts painted a bleak picture going into 2008. "Both segments face a number of economic uncertainties as they look toward 2008," Fred Thimmel noted in The MHEDA Journal Online in 2008, adding that "What is reasonably certain is that the industry growth rate of 6 percent, based on booked orders for 2007, will not be reached in 2008." Between the slowdown in the construction market, credit crisis, tightening of business expenditures, and lack of consumer confidence, the conveying system industry would join the rest of the depressed manufacturing industry.

In 2008, conveyors and conveying equipment manufacturers held 69.6 percent in market share with shipments totaling $3.57 billion. Other major industry categories were belt conveyor systems (general industrial use), pneumatic tube conveyor systems, and bulk handling conveyor systems.

During the first half of 2009, the Conveyor Equipment Manufacturers Association (CEMA) reported industry shipments fell 18.8 percent, or $3.18 billion, compared to the same period in 2008. The association cited $2.89 billion in new orders during the same time. In addition, bulk handling conveyor system orders declined 25 percent, while shipment values fell 14 percent. Unit handling orders were down as well by 26 percent, and shipments fell 23 percent.

Current Conditions

By 2010, conditions in the industry were starting to improve. According to the Conveyor Equipment Manufacturers Association, shipments of conveyors in North America in 2010 were valued at $6.6 billion, up almost 10 percent as compared to 2009. More recent figures showed that overall industry orders for the first six months of 2011 increased more than 38 percent compared to the same period in 2010.

The conveyor and conveying equipment manufacturing industry was primarily composed of small establishments; about 63 percent employed fewer than 25 workers, according to Dun and Bradstreet, in 2010. According to industry statistics, there were an estimated 1,012 establishments engaged in manufacturing conveyors and conveying equipment for installation in factories, warehouses, mines, and other industrial and commercial establishments in 2010. Sales were valued at $3.1 billion and industry-wide employment was 30,206 workers. States with the highest concentration of workers in the industry were Michigan, Ohio, Pennsylvania, and Illinois.

Industry Leaders

Continental Conveyor & Equipment Co., located in Winfield, Alabama, was one of the leading domestically owned manufacturers. Continental was owned by Nesco Inc., a private holding company that also owned Goodman Conveyor Co., a manufacturer of conveyors for bulk material handling. Continental Conveyor primarily manufactured conveyors for mining and construction tasks, as well as conveyors that are able to convey materials over land for hundreds of feet. In 2005, the company had $125 million in sales and employed 700 workers.

Continental Global was acquired by Joy Global, headquartered in Milwaukee, Wisconsin, for an estimated $270 million in early 2008. Through its subsidiaries, Continental Conveyors & Equipment Co. and Goodman Conveyor Company Inc., Continental Group designed and manufactured conveyor systems and components for the mining industry. Continental Global reported revenues of approximately $340 million in 2007. Joy Global posted $3.5 billion in 2010 revenues.

Other industry leaders were foreign owned and included the British company FKI Logistex North America, which manufactured package conveyors used by FedEx and UPS, and Siemens Industry Automation, formerly Siemens Energy & Automation, a subsidiary of the German company Siemens AG.

Workforce

Employment levels in the material handling equipment manufacturing industry dropped during the 1980s and 1990s as automation increased. In 1982, employment was 36,400 nationwide, falling to 30,600 by 1993. This figure rose to 33,100 in 1994 and to 40,319 in 2000, then dropped to 34,159 in 2002. Production workers numbered 18,362 and earned an average hourly wage of $17.36 in 2002, compared to an hourly wage of $14.17 in 1997. The material handling equipment industry as a whole also saw a drop in its workforce. In 2002, there were 82,148 total employees in the industry, with 49,682 of these production workers, but the total number of employees dropped to 73,867 in 2004, with 45,606 of these production workers, according to U.S. Census Bureau data. By 2009, the industry employed 73,853 people, about 62 percent of whom were production workers earning an average wage of $19.73 an hour.

The direct production workers in the conveyor and conveyor equipment industry are broadly classified by the U.S. Department of Labor as working within the "general purpose machinery manufacturing" segment of the machinery manufacturing industry. Skilled workers in this industry earn relatively higher wages and need skills that are based on advanced training and education acquired through technical schools, apprenticeship programs, and on-the-job training. Employment in the general purpose machinery manufacturing sector was expected to decline a total of 7.6 percent between 2008 and 2018, according to the Bureau of Labor Statistics' Career Guide to Industries.

America and the World

The markets that have the highest demand for material handling equipment, of which conveyor systems and equipment is the second largest segment, have been those industrialized countries with large manufacturing bases, such as in Europe, North America, Japan, Korea, and China. While some of these countries have large markets for material handling equipment, they are also major producers of this equipment and host companies that compete in the U.S. domestic market. According to the Material Handling Equipment Distributors Association Journal, there are about 1,000 industry competitors worldwide. The United States has been importing more material handling equipment than it has been exporting since at least the late 1990s.

Research and Technology

The food and beverage industries employ conveying systems primarily for their labor savings, but speed and performance are also important. In the food industry, many products such as baked goods, breakfast cereals, and snack chips need careful handling during the production and packaging processes. To meet this need, "horizontal motion conveyors" have been developed and were increasingly being used during the 2000s. With these conveyors, products gently slide along with no vertical motion and so do not bounce, which causes product damage. Speed, reliability, and performance are emphasized as top priorities of beverage production lines. Production machines are continually being improved to perform at faster rates. However, the production rate of a machine is meaningless unless the conveyor system can deliver the containers on time. Because bottling companies are demanding higher production rates from machines, in some cases as much as 1,600 units per minute or more, material handling equipment manufacturers have had to redesign their products to meet the higher speeds. Computerized process flows have made the industry more sophisticated, allowing for variable speed control through "intelligent" software that accepts feedback from key points in the system.

Technological developments of particular significance in the 2000s included faster and quieter belt conveyors powered by stronger motors. Examples include the drum motors introduced in 2005 by BDL America Ltd., which could run at belt speeds of 1,369 feet per minute. In 2006, F.A. Miller & Son, an Australian company, introduced its "air-supported belt conveyor technology," a technological concept similar to hovercraft technology. In this conveyor technology, air is forced up from below the belt so that the belt glides along on a cushion of air. This technology reduces the amount of moving parts needed, is more energy efficient, and decreases conveyor friction, which reduces parts maintenance, according to the company. Air-supported belt conveyors are able to handle a variety of materials, from crushed rocks and minerals to foodstuffs. Another development in conveyor technology has been the introduction of modular conveyor systems. Modular conveyor systems, as opposed to conventional "fixed length systems," are composed of sections or modules that can be reconfigured much more easily and cost effectively than fixed length conveyors. Modular systems are also easier to maintain and require fewer replacement parts. The flexibility that modular systems provide boosts productivity, and is especially important in meeting increasingly intricate production processes and high quality control standards.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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